A partnership can be an excellent business venture if everything is laid out correctly. Knowing exactly what the partnership will entail is one of the most important considerations.
As you’re discussing the partnership, consider each aspect of the agreement so you can determine precisely what you need to do. When you draw up the partnership agreement, you need to have the basics like the partnership’s name and other essential information. Consider including these additional points:
How are profits and losses handled?
Outline precisely how profits will be split and what happens if the business has a loss. While discussing this, also talk about vacation time and sick days. The goal should be to have all the benefits of being a partner spelled out clearly.
Who can make which decisions?
Discuss who is going to make which decisions for the business. Clearly define what minor decisions can be made by one partner. Define what constitutes a significant decision that has to be made by all partners. This can save a lot of trouble in the future.
What happens when there are disputes?
The dispute resolution method should be included in the partnership agreement. This can consist of how disputes that can’t be handled between partners will be resolved. This might be mediation, arbitration or litigation. Be sure to include terms that stipulate that these matters aren’t discussed where people who don’t need to be privy to the conversation can hear.
Make sure you get everything spelled out as it’s agreed upon so either party can review the terms later if necessary. Working with someone who can help you set these terms is critical, mainly because you must protect yourself and the company.